How bad is BP?

Russia is an unsavoury place to do business; that does not make BP’s Russian deal wrong

VLADIMIR PUTIN has a wry sense of humour. Commenting on the new tie-up between BP, a British oil firm, and Rosneft, a Russian state-controlled one, he remarked that “one who has been beaten is worth two who haven't.” That could refer to the reputational battering BP recently sustained after its disaster in the Gulf of Mexico, or to BP's experiences in Russia. In 2008 Bob Dudley, then boss of TNK-BP, a joint venture set up in 2003 to pump Siberian oil, had to flee Russia amid what he called “sustained harassment” from his hosts.

Yet BP has done well out of Russia: TNK-BP is now a thriving business that contributes an eighth of the British giant's profits (and Mr Dudley, pictured left shaking hands with Rosneft's boss, now runs the British oil giant). But Mr Putin's casually thuggish comment, and the fuss that the deal has caused, point to an underlying problem for businesspeople: should a responsible company climb into bed with a dodgy one?

Rosneft is a brazen example of Mr Putin's crony state capitalism (see article). Its main asset was grabbed from Yukos, a private firm destroyed by the Kremlin in 2004—its boss, Mikhail Khodorkovsky, was too independent-minded for Mr Putin's taste and was thrown into jail. And this is a deal not just to buy or distribute oil but to swap ownership stakes. BP's critics say it legitimises theft (right after Mr Khodorkovsky's sentence had been extended by another seven years) and bolsters the belief in the Kremlin that Western business people are really just as greedy and cynical as its own oligarchs: all that high-mindedness over corruption and property rights melts away whenever Russia dangles an oily profit in front of them.

This newspaper is no fan of Mr Putin, and has warned Western companies of the perils of dealing with him. After Yukos's dismemberment, we advised investors not to buy Rosneft's shares when it was allowed to list on the London Stock Exchange. But BP is surely free to weigh the merits of a deal.

Caesar, God and the politicians

The energy business does not reward squeamishness. From Arabia to Africa, it is dominated by unsavoury state firms. If the American politicians making jokes about Bolshoi Petroleum applied the same standards to other countries and their own companies, their cars would have run out of gas long ago.

But there is a stronger argument than the difficulty of maintaining high standards in a dodgy industry: the division of responsibility between corporate and political actors. A company's job is to make money for its shareholders legally. Morality is the province of private individuals and of governments. BP's move will certainly make it harder for Western politicians to handle Mr Putin. But if they want to stop companies from doing deals with Mr Putin's mob—or to be diverse, or charitable, or nice—they should pass laws, not make speeches.

Opponents of shareholder capitalism claim that it is unscrupulous. Yet good behaviour is usually good business. BP's deal may turn out to be a rotten one because of Rosneft's dodgy origins. Yukos's disgruntled former shareholders are pursuing Russia through international courts with claims for nearly $100 billion. BP will surely be dragged into this mess. And Mr Putin's friends may decide that the British firm is worth another spot of “sustained harassment”.

BP is betting that Russia needs its expertise; that the Russian state is less likely to sabotage a joint venture in which it has a stake; and that because this is the first deal of its kind, the Russian government needs to make it work. So the deal is a gamble—but one that BP's managers are entitled to take.